The seemingly insatiable demand for large-scale warehouse/industrial buildings has breathed life into another, typically overlooked asset class that is drawing the widespread attention of both end-users and investors alike. Industrial Outdoor Storage (IOS), also known as Outdoor Storage Land (OSL), has emerged as a significant complementary necessity among logistics companies that need space to stage or provide short-term storage for products prior to shipping them to the next destination. The requirement is particularly acute in port city locations, such as Baltimore.

Bethesda, Maryland-based 1788 Holdings, LLC acquired two assets in Baltimore City over the past several of weeks – 6901 Rolling Mill Road and the 350,000 square foot 1601 Wicomico Street – in part due to the existence of available outside storage land, according to company principal Larry J. Goodwin.

“As a port city, Baltimore is a primary destination for roll-on/roll-off cargo, particularly automobiles, trucks and heavy equipment cargo, and there remains continuing demand for storage sites with immediate proximity,” Goodwin explained. “Most of the infill light industrial properties in the immediate trade area do not have excess land for this type of storage, and we are filling this ongoing need. The availability of this acreage represents a significant competitive advantage in the Baltimore City submarket and remains a point of emphasis in our ongoing acquisition strategy.”

6901 Rolling Mill Road, Baltimore City

Industrial Outdoor Storage has emerged as an valuable piece of the logistics supply chain, with end-users utilizing the space to sort through containers that have recently arrived on overseas vessels. Trucks, automobiles and construction vehicles are regularly placed on the lots in a “layover” situation, while awaiting their next transport to a final destination. The emerging asset class has been called “mission-critical” by some real estate experts and typically range in size from five to 20 acres.

“I often refer the Interstate 95 corridor as the East Coast main street for large-scale warehouse buildings. These facilities need backup land for trucks, materials and products of all sorts and other uses,” stated Mitch Gold, President and CEO of Gold and Company. “Operating an efficient logistics operation means everything in our current environment of next-day commerce, thanks to what many refer to as the Amazon effect. Just-in-time inventory has now become just-in-case inventory, which means warehouses are now overstocked with products they believe consumers will continue to purchase. All of this maneuvering requires trucks and trailers to move products around and sometimes there just isn’t enough space inside the warehouse.”

Gold points to the Fairfield Maritime District in Baltimore City which he terms “a gigantic parking lot full of cars and other vehicles in international transit that recently arrived from international ports of call.”

He adds that “the old trite saying that they’re not making any more land is true, and it remains a premium especially in the Baltimore region because land prices are less expensive than in New Jersey and New York. Plus, no one wants industrial projects around them due to environmental regulations and other complications. The Port of Baltimore is considered the #1 RoRo (roll on/roll off) destination in the country due to its closer proximity than other east coast ports to the mid-west, highway connections and heavy rail component.”

“Two to three years ago, interest and overall demand was increasing for this asset class but now, it has become so popular that the category even has its own name,” stated Dan Hudak, SIOR, Senior Vice President and Principal, MacKenzie Commercial Real Estate Services. “That’s when I realized the Industrial Outdoor Storage was evolving into something significant.

“Mirroring the dramatic growth of the warehouse and industrial sector, the shutdown due to COVID-19 lit a fire beneath the e-commerce industry and placed extreme pressure not only on existing inventory and the development pipeline, but also the need for land to park trucks and vehicles to transport product to consumers. Because of the high barrier of entry into this market, in part due to the dearth of industrial zoned land, suddenly, many different users were chasing relatively few outdoor storage spaces, with long-term users in the construction contracting and utility industries getting squeezed. Available land is always at a premium, but there was a new level of interest among developers to acquire land to build new product, and among end-users to store or stage materials and equipment.”

The trend is happening in Baltimore, in other port cities and nationally.

“The general consensus is that it will only become harder to find suitable outdoor storage sites,” Hudak said. “This, in turn, has dramatically increased pricing and has attracted the attention of real estate investors and private equity firms.”

Furthermore, current events could drive the demand even higher.

“The commercial real estate world is closely watching the movement of the national infrastructure legislation and its impact on the construction and development industries in particular,” Hudak added. “Its passage will especially kick infrastructure contractors into high gear, which will only heighten the interest and need for outdoor storage spaces.”